Company Name: Northern States Power Co. (Recon.)
Public Availability Date: 07-25-1995
INQUIRY LETTER
GARDNER, CARTON & DOUGLAS
SUITE 3400-QUAKER TOWER
321 NORTH CLARK STREET
CHICAGO, ILLINOIS 60610-4795
TELEPHONE(312) 644-3000 June 27, 1995 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Rule 14a-8(d)-Request for No-Action Letter on behalf of Northern States
Power Company, a Minnesota corporation, in connection with a Shareholder
Proposal of Marlys Weber and Bruce Drew Ladies and Gentlemen: Pursuant to Rule 14a-8(d) of the Securities Exchange Act of 1934, as amended
(the "Act"), Northern States Power Company, a Minnesota corporation (the
"Company"), hereby respectfully asserts that the referenced shareholder proposal
(the "Second Proposal") and accompanying statement in support thereof may
properly be omitted from the 1995 proxy statement and form of proxy relating to
the Company's Annual Meeting of Shareholders currently anticipated to occur in
September 1995. Definitive copies of the 1995 proxy statement and form of proxy
are tentatively scheduled to be filed pursuant to Rule 14a-6 as soon as
clearance of the preliminary proxy statement is obtained from the Securities and
Exchange Commission (the "Commission"). The preliminary proxy materials were
filed on June 7, 1995. The Company hereby requests confirmation that the staff
of the Division of Corporation Finance (the "Staff") will not recommend any
enforcement action to the Commission if, in reliance on one or more of the
Company's interpretations of Rule 14a-8, the Company excludes the Second
Proposal from its proxy materials. Pursuant to Rule 14a-8(d), enclosed herewith
are six copies of the following materials: (1) this letter, which represents the Company's statement of reasons why
omission of the Second Proposal from the 1995 proxy statement and form of proxy
is appropriate and the Company's supporting legal opinion of counsel; (2) the Second Proposal and statement in support thereof, attached as Exhibit A
hereto, which was submitted by Ms. Marlys Weber and Mr. Bruce Drew (the
"Proponents") on June 15, 1995; (3) a proposal (the "First Proposal") and statement in support thereof, attached
as Exhibit B hereto, which was submitted by the Proponents on November 15, 1994;
and (4) the Commission's letter stating that it would not recommend enforcement
action if the Company omitted the First Proposal from its 1995 proxy statement,
along with the Company's letters dated December 22, 1994 and February 10, 1995
setting forth the reasons why the Company intended to omit the First Proposal
from its 1995 proxy statement, attached as Exhibit C hereto. Background The Company had originally anticipated that its 1995 annual meeting would be
held in April 1995. Consequently, in its proxy statement for its 1994 annual
meeting, the Company stated that, to be included in the proxy statement for the
1995 annual meeting, shareholder proposals had to be received by the Company no
later than November 15, 1994. The Proponent's submitted their First Proposal on
November 15, 1994 (see Exhibit B). The First Proposal related to security at the
Company's nuclear facilities. By letters dated December 22, 1994 and February
10, 1995, the Company stated its position that the First Proposal could be
omitted from the 1995 proxy statement pursuant to Rule 14a-8(c)(10) because it
was moot (see Exhibit C). By letter dated February 16, 1995, the Staff
responded, "There appears to be some basis for the Company's view that the First
Proposal may be excluded from the Company's proxy materials pursuant to Rule
14a-8(c)(10) as moot." (See Exhibit C) The Company subsequently announced its plans to merge with Wisconsin Energy
Corporation and decided to delay the 1995 annual meeting so that shareholders
could consider and vote on the merger at such meeting. In accordance with Rule
14a-5(e), the Company informed its shareholders that the annual meeting had been
delayed and that shareholder proposals were due no later than June 15, 1995. On
June 15, 1995, the Proponents submitted the Second Proposal, which is described
below. The Second Proposal The Proponents recommend that the Board of Directors: "(1) Place Prairie Island Units 1 and 2 in mid-cycle outages at the earliest
possible date to conduct a full length inspection of all steam generator tubes
using the Zetec Plus Point probe, and (2) report all steam generator tube test results to the shareholders of NSP, the
Mn. Department of Public Service, Mn. Department of Health, Mn. Public Utilities
Commission, Mn. Attorney General, the Minneapolis Public Library Document Room,
and the U.S. Nuclear Regulatory Commission." I. The Second Proposal and Supporting Statement may be Omitted from the
Company's Proxy Material for the Following Reasons: A. Rule 14a-8(a)(4)-A PROPONENT MAY SUBMIT ONLY ONE PROPOSAL Under Rule 14a-8(a)(4), a proponent may submit "no more than one proposal and
accompanying supporting statement for inclusion in the registrant's proxy
materials for a meeting of security holders." (emphasis supplied) The Proponents have already submitted a proposal (the First Proposal) for
inclusion in the proxy material for the 1995 annual meeting. As indicated in the
correspondence included as Exhibit C, the Company intends to exclude the First
Proposal from its proxy material for the 1995 annual meeting because such
proposal is moot. The Proponents now seek to submit a Second Proposal for the
same meeting. This is not permitted under Rule 14a-8(a)(4). Rule 14a-8(a)(4)
permits one proposal per meeting. The Company's decision to delay the 1995
annual meeting resulted in an extension of the time to submit proposals, not
authorization to submit additional proposals. Despite the fact it is anticipated
to be held in September instead of April, as is normally the case, this meeting
will be the Company's annual meeting for 1995 at which the shareholders will
elect directors. The fact that the meeting has been delayed does not trigger an
obligation to permit more than one proposal per shareholder for that meeting. The fact that the Company may properly omit the Proponents' First Proposal does
not give the Proponents the right to submit an additional proposal. Having fully
availed themselves of the procedures established under Rule 14a-8 and having
received an adverse decision, the Proponents cannot now start over with a new
proposal. One of the Commission's objectives in reducing to one the number of
proposals that a proponent may submit was to reduce the costs faced by
registrants. SEC Rel. No. 34-22091 (Aug. 16, 1983). The Company incurs
additional legal and administrative costs with each proposal it must consider.
Allowing the Proponents to submit the Second Proposal because of the Company's
unusual timetable would contradict the Commission's purpose in amending the
Rule. B. Rule 14a-8(c)(7)-THE SECOND PROPOSAL MAY BE OMITTED IF IT DEALS WITH ORDINARY
BUSINESS OPERATIONS Under Rule 14a-8(c)(7), a proposal dealing with a matter relating to the conduct
of the ordinary business operations of the registrant may be omitted from the
proxy materials. This Rule is based on the realization that it is impracticable
for stockholders, who may not have the experience and specialized skills
necessary to make informed decisions, to play an active role in solving
management problems. (85th Cong. 1st Sess. §1242, tab 2 (1957)). The Proponents' Second Proposal consists of two parts: 1) it recommends a
specific method by which to test the Company's equipment, and 2) it requests a
report on the results of these tests. Until 1983, the staff took the position
that proposals requesting that issuers prepare special reports could not be
omitted under 14a-8(c)(7). In Release No. 34-20091 (Aug. 16, 1983), however, the
Commission stated that a proposal requesting a report may be omitted if the
subject matter of the report involves a matter of ordinary business.
Consequently, whether the proposal may be omitted will depend on whether the
recommended tests, which are also the subject of the report, are considered
ordinary business. The means and timing of steam tube testing are components of the day-to-day
operational concerns of a nuclear power plant. The people who operate the plant
on a day-to-day basis have the knowledge and training to best handle the
multitude of considerations that enter into operational decisions such as those
involved in the Second Proposal. In addition, the operations of nuclear
facilities are subject to comprehensive regulation by the Minnesota Public
Utilities Commission and the Nuclear Regulatory Commission. Is it impractical to
involve shareholders who lack the training and knowledge of nuclear power plants
in the minute determination of how the Company tests its equipment. See,
Southwestern Bell Corp. (May 31, 1995)(proposal to protect unlisted number
subscribers from caller identification program may be omitted as ordinary
business); Pacific Telesis Group (Feb. 21, 1990)(proposal to establish Director
whose job is to implement changes to reduce toxic waste, encourage use of public
transportation, and reduce CFCs omitted because it involved "discrete
operational matters"); Bay State Gas Co. (Jan. 21, 1981)(proposal relating to
amount of time company takes to service customers relates to conduct of ordinary
business); General Dynamics Corp. (Feb. 25, 1980)(proposal to disclose
information about toxic chemicals and implement program to improve health and
safety conditions was within scope of ordinary business operations). In Release 34-12999, the Commission stated that a proposal that a company not
construct a nuclear power plant involved such important economic and safety
considerations that it could not be considered an ordinary business matter.
However, the Commission clarified that not all proposals dealing with nuclear
facilities will implicate these broad policy issues. As with any type of
proposal, "mundane" business matters that do not involve substantial policy or
other considerations may still be omitted. SEC Release No. 34-12999 (Nov. 22,
1976). See, e.g., Pacific Gas & Electric Co. (Jan. 26, 1982)(proposal to seek
remuneration from Nuclear Regulatory Commission for delay resulting from failure
to discover design flaws in Diablo Canyon nuclear plant may be omitted as
ordinary business.) Since Release 34-12999, the Staff has refused to take no-action positions in
several cases where policy considerations were implemented. In Carolina Power
and Light Co. (Feb. 23, 1989), a shareholder proposed that management make
available detailed and technical information about the day-to-day operations of
the plant, as well as about accidents, waste disposal, and liability. The
proposal also requested that management assess the "financial and other risks of
continued operation, generation of radioactive wastes, release of low-level
radiation, evacuation, and possible catastrophic accidents." The Staff concluded
that "the proposal raises substantial policy implications concerning safety
considerations involved in nuclear power operations that preclude its exclusion
as a matter relating to the Company's ordinary business." Unlike the proposal in Carolina Power, the Proponents' Second Proposal deals
with a specific method by which the Company performs tests on its equipment.
This is a matter related to the ordinary business of the Company. Therefore, the
Proponents' Second Proposal may properly be omitted pursuant to Rule
14a-8(c)(7). C. Rule 14a-8(c)(3)-THE PROPOSAL IS CONTRARY TO THE COMMISSION'S PROXY RULES,
INCLUDING RULE 14a-9, WHICH PROHIBITS FALSE OR MISLEADING STATEMENTS IN PROXY
SOLICITING MATERIALS The Proponents' statement in support of their proposal is false and misleading
because it implies, among other things, that the Company is not using the Zetec
(Plus) Point probe, is not adequately testing its equipment, and is exposing its
employees and the environment to radiation. All of these implications are untrue
and unfair to the Company. Specifically, the Proponents state "the steam generator tubes...are cracking
along and around the tubes, are leaking radioactive steam into the environment,
and may rupture...." This is just not true. The Company has discovered that the
steam generators are susceptible to corrosion and, accordingly, has filed suit
against the manufacturer to recover past and future costs of inspections,
maintenance, modifications and repairs. As the Company reported in its Form 10-K
for the year ended December 31, 1994: Safety has not been, nor will be, compromised in any way as a result of the
defects because the plant has been and continues to be well-maintained. The
steam generator problem is less severe at Prairie Island than at most other
plants with the same model steam generator. This is due to specific plant design
features, including a lower reactor coolant water temperature than most of the
other plants. Other reasons are due to the higher standards used at Prairie
Island in such areas as water chemistry and preventative maintenance. Based on
analysis done, it is the Company's best estimate that the steam generators can
be maintained so replacement will not be necessary before the units' 40-year
operating licenses expire. At this time, there is no evidence to support Proponents' statements that the
generators are leaking radioactive steam. Moreover, the location of the
corrosion is such that the tube is effectively constricted and it is impossible
for the tube to rupture. Proponents also state that the Zetec (Plus) Point probe was used at Maine Yankee
for full tube length testing. This is not true. Based on conversations with
responsible Maine Yankee personnel, it is the Company's understanding that Maine
Yankee used the Zetec (Plus) Point Probe to test substantially less than the
entire length of steam tube. To the Company's knowledge, no other utility has
used the Zetec (Plus) Point probe for full length tube testing. Proponents also
state that the Zetec (Plus) Point probe is more effective than the "older, less
sophisticated motorized rotating pancake coil and bobbin coil probes," thereby
implying that the Company does not use the Zetec (Plus) Point probe and,
instead, relies on older, outdated equipment for testing its nuclear facilities.
Again, this is just not true. The Company does use the Zetec (Plus) Point probe
for testing of its steam tubes. Because of the time and expense involved in
using the Zetec (Plus) Point probe, however, the Company only utilizes the Zetec
(Plus) Point probe where there is evidence of corrosion. The Company utilizes
the bobbin coil probe to test the entire length of the tubes and the bobbin coil
probe is very effective at screening data and indicating possible corrosion.
Moreover, the Company does not use old, outdated, unsophisticated equipment in
its testing. The Company constantly reviews its safety and testing programs to
ensure that the highest standards are met. As a result, the Company uses
state-of-the-art equipment and consistently receives superior ratings in the
areas of engineering and maintenance from the Institute of Nuclear Power
Operators. Finally, Proponents state that a steam tube rupture would "expose workers at
Prairie Island to additional radiation...." As indicated above, there is no
possibility of a steam tube rupture as a result of this corrosion. Therefore, because the Proponents' Second Proposal is false and misleading, the
proposal may properly be omitted pursuant to Rule 14a-8(c)(3). II. Request for Waiver of 80-Day Filing Requirement Rule 14a-8(d) requires that the information being filed with this letter be
submitted "not later than 80 calendar days prior to the date definitive copies
of the proxy statement and form of proxy are filed...or such shorter period as
the Commission or its staff may permit...." As indicated above, the Company
delayed its annual meeting in order to permit the merger to be considered and
voted upon by the shareholders. In accordance with Rule 14a-5(e), the Company
informed its shareholders that the annual meeting had been delayed and that
shareholder proposals were due no later than June 15, 1995. The Company would
like to be in a position to circulate its definitive proxy statement as soon as
practicable after clearance of the preliminary proxy statement is obtained from
the Staff. The preliminary proxy materials were filed with the Commission on
June 7, 1995. Because the Second Proposal was received less than 80 days prior
to the anticipated filing of the definitive proxy materials, it is impossible
for the Company to satisfy the 80-day requirement. The Company has responded to
the Second Proposal as promptly as practicable. We respectfully request,
therefore, that the Commission or its Staff exercise its authority under Rule
14a-8(d) to permit a shorter time period and to deem this filing timely. * * * * For the reasons given above, we respectfully request that the Staff not
recommend any enforcement action from the Commission if the Second Proposal is
omitted from the Company's 1995 proxy materials. If the Staff disagrees with the
Company's conclusion to omit the Second Proposal, we request the opportunity to
confer with the Staff prior to the final determination of the Staff's position.
Notification and copies of this letter are simultaneously being forwarded to the
Proponents. Should you have any questions or require additional information, please contact
the undersigned at (312)245-8754. Very truly yours, Robert J. Joseph cc: Marlys Weber
Bruce Drew
[STAFF REPLY LETTER]
July 25, 1995 Peter D. Clarke, Esq.
Gardner, Carton & Douglas
Suite 3400 Quaker Towers
321 North Clark Street
Chicago, Illinois 60610-4795 Re: Northern States Power Company
Incoming letter dated June 27, 1995 Dear Mr. Clark: This is in response to your letter dated June 27, 1995 requesting a
reconsideration of the staff's position in Northern States Power Company,
(February 16, 1995) concerning a shareholder proposal submitted by Marlys Weber
and Bruce Drew to the Company. After considering this matter, in the light of your letter, this Division
concurs with your view that the proposal may be omitted from the Company's proxy
materials under Rule 14a-8(a)(4). Sincerely, Vincent W. Mathis
Special Counsel Enclosures cc: Bruce Drew
4425 Abbott Av. So.
Minneapolis, Minn. 55410 Marlys Weber
4657 Colfax Av. So.
Minneapolis, Minn. 55409
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